This week the Reserve Bank exercised its muscle to cut interest rates to an all-new historic low, taking the cash rate to just below 1 per cent.
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So what does that mean?
When we talk about interest rate cuts, we seem to gravitate more towards conversations to do with the housing market.
Many of us have a mortgage and when times are tough for many of us our first thought is how am I going to manage to continue to pay my mortgage?
But when you consider that the saving on an average home loan will be around $400 a year, does it really make all that much of a difference?
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Of course the average home loan doesn't represent everyone with a home loan.
Some will save more. Some will save less.
Probably a more relevant conversation this time around has to do with retirees; especially those who are living off their hard-earned savings.
Back when interest rates were higher, retirees with a reasonable nest egg could earn a living off their interest.
Say you had a million dollars. When the interest rate was up around 10 per cent, you'd pocket $100,000 a year and, unless you had an especially extravagant lifestyle, you could quite comfortably live off that amount of money.
Now, with interest rates sitting around one per cent, it's more like $10,000. (That's if you had a million in the first place).
Lately there has been plenty of interesting commentary about how lowering interest rates will affect the next generation.
As well as changing the expectations of the current generation, lowering interest rates will also force a mindset change in the next generation.
To put it bluntly, they won't get what they once could have expected.
No longer is it feasible to just live off the interest you are making and then leave the rest of your money to the children.
In fact children will be lucky if there is anything left to inherit, because Mum and Dad will be forced to live off their capital as well.
It's a very interesting times.
It's like that ad for Specsavers where the son and the mum are sitting at the table talking about her inheritance.
"Don't worry," she says. "I'm leaving it all to Derek."
If we keep going this way, Derek's going to have to work a little longer, too.
